While the good news was delivered under a blue sky, officials later acknowledged the threat of darkening clouds. The last year brought a $71 million cut in federal funding to the city's Department of Housing Preservation and Development, an agency that had been forced to lay off 300 employees over the past three years. Future funds to HPD may now be in jeopardy as Congress' "super committee" settles on methods to reduce the U.S. budget deficit.
The axe could fall on programs vital to the New Housing Marketplace Plan, such as the Low Income Housing Tax Credit, which indirectly subsidizes financing for the construction or rehabilitation of affordable housing, and Community Development Block Grants. Earlier this year the Republican House proposed eliminating block grants, which provided HPD with about $130 million—or nearly 76 percent of its federal funding—in the 2011 budget. The city said the cut would have meant the loss of 700 more workers and decimated the agency's efforts to fix unsafe housing conditions.
Not surprisingly, cuts in federal funds come down particularly hard on the poor. In 2010, the New York City Housing Authority's Section 8 program faced a $42 million shortfall, placing as many as 10,000 families at risk before federal intervention. HPD ended up taking on NYCHA's Section 8 participants. HPD Commissioner Mathew Wambua recently told a breakfast meeting on affordable housing that the city couldn't bear the burden of deeper cuts without "significant pain."
A plan, then a shift
The mayor unveiled his New Housing Marketplace Plan in December 2002 to develop and preserve apartments for low- to middle-income tenants. In exchange for loans to construct or to renovate housing—or in return for tax breaks—building owners or developers would agree to keep rents affordable, which means rents can claim no more than 30 percent of tenants' wages. These agreements can last for decades.
Traditionally, federal regulations have targeted most subsidized housing at New Yorkers earning 80 percent of the Area Median Income or less, which generally translates into a family of four making a maximum of $63,360 a year. The mayor's plan differed from earlier ones by targeting families with very low incomes (30 percent of AMI or less) as well as income groups that normally aren't served by affordable housing, aiming 11 percent of the plan's units to families of four making between $63,000 and $95,000 a year and 21 percent to those with six-digit incomes.
These moderate- and middle-income New Yorkers face a shortage of affordable housing, but claims that the mayor's plan helps the city's poor are largely "exaggerated," says Tom Waters, a housing policy analyst at the Community Service Society of New York, an advocacy group for low-income people (and the owner of City Limits). "Most families fall in the under $60,000 category."
Bloomberg was unapologetic when the majority of apartments at the new Hunters Point South development were targeted to households making around $100,000 a year: "We are setting the stage for the largest investment in permanently affordable housing for our police officers, nurses, teachers, and public employees and other middle-income New Yorkers." At other times, however, the mayor went out of his way to characterize his plan as an all-encompassing life preserver that could offset even the losses of stabilized-rent apartments: "We can secure our future as a city of opportunity, where all New Yorkers can afford to live and pursue their dreams."
The challenge of cost
Under the initial plan, the mayor's goals were modest: 65,000 units built or preserved by 2008. But in 2006 the plan's goal grew to 165,000 affordable homes by 2013, with the city spending $7.5 billion to build 92,000 units and preserve another 73,000. Since then, the deadline has been pushed back one year, the program's price tag has added another $1 billion, and preservation has been promoted over new construction. The final goal is now 54,500 new affordable units built and 105,600 subsidized apartments preserved.
But even after this shift to preserve more affordable units rather than to build them from scratch—which should lower costs as well as qualifying income thresholds—the mayor's plan faces challenges. Nearly 16,400 of the remaining 40,000 apartments will be new construction, and the mayor's capital budget for 2011-2014 has slashed $70 million from HPD. The city has also reduced annual funding to HPD, from $80 million in 2008 to $60 million in 2011 and $67 million in 2012.
The shift to preservation came with the housing crash and subsequent freeze in credit markets, but the crisis also created opportunities, according to HPD spokesman Eric Bederman. "The silver lining was that it opened up a whole new market for preservation," Bederman says. "During the housing boom, affordable developments like Mitchell-Lamas nearing the end of their regulatory agreements would opt out of the program and go market rate. In this climate, the opposite can happen—there's less incentive for them to opt out because the market isn't offering what it was. It gives us the ability to come in with new offerings. They're fairly old properties, and they need upgrades, major and minor, which means refinancings. We offer low-interest loans for capital improvements and refinancing. In return, there's a regulatory agreement that extends their stay in the program for another 30 years or more."
Since 2003, the city has preserved more than 30,000 Mitchell-Lama units, and it projects another 10,000 will be added through the New Housing Marketplace Plan. About 45 percent of the original 69,800 Mitchell-Lama units are still in the program, but currently 26 buildings—with 7,500 units—can opt out if the owner gives tenants just one year's notice.
Waters hopes the move to re-regulate Mitchell-Lama buildings is successful, but he believes the window of opportunity will be short. "The longer-term picture isn't as bright because rents are still high and an owner can reasonably expect to get a good return from an apartment, much more than low-income people can pay," Waters says. The median income of tenants in Mitchell-Lama housing is about $25,000 a year. "It won't be easy to figure out how to make these deals work to provide affordability for the people who need it the most in the long-term." The city will have to be tough negotiators, he cautions, "and it will still probably cost a fair amount of money to achieve true affordability."